Costs from acquisition cited as Caesars profit falls 30 percent

Thursday, April 21, 2005 | 10:39 a.m.

Profit at Caesars Entertainment Inc. fell 30 percent in the first quarter because of costs related to the sale of the company to Harrah's Entertainment Inc., which is expected to close its purchase by the end of June.

Caesars today reported first-quarter profit of $50 million or 16 cents per share compared with profit of $71 million or 23 cents per share for the same quarter of last year.

The earnings report is expected to be the company's last as a separate entity.

Earnings were dampened by $155 million in acquisition-related costs. Of that amount, the company spent $143 million to buy up stock sold by Caesars executives upon shareholder approval of the Harrah's acquisition. Executives may elect to cash out all of their stock options according to a change of control provision in the company's incentive compensation plan.

Also included in first-quarter results was a $68 million after-tax gain from the March sale of Caesars' interest in a South Africa casino.

Excluding these costs and other one-time expenses unrelated to operating performance, the company earned $82 million or 25 cents per share compared with $61 million or 20 cents per share a year ago. Analysts expected the company to earn 22 cents per share.

Revenue, including promotional expenses, rose 2 percent to $1.1 billion.

Earnings before interest, taxes, depreciation, amortization and other expenses unrelated to operations rose 4 percent to $302 million -- an all-time record, the company said. Also excluded is $4 million in operating results from the the Atlantic City Hilton, Bally's Tunica, Bally's New Orleans, Caesars Tahoe and the South Africa casino. The four U.S. casinos are being sold to prepare for the company's takeover by Harrah's.

Strong results on the Las Vegas Strip and gains at the company's Southern casinos drove profit growth, Chief Executive Wally Barr said in a statement.

Las Vegas results, marked by soaring hotel rates, were similarly strong for other Strip operators reporting earnings this week.

"As we move toward the scheduled completion of our acquisition by Harrah's Entertainment, we know that we have put in place a strong portfolio of first class casino resorts that are well positioned to continue their remarkable success under a new owner," Barr said.

First-quarter revenue at the company's Las Vegas Strip resorts was fairly flat with a year ago at $456 million. Earnings before interest, taxes, depreciation and amortization rose 7 percent to $151 million.

Occupancy rates across the Las Vegas properties fell from last year, but hotel rates rose. Occupancy at the company's flagship, Caesars Palace, fell 5 percentage points to 93 percent. Average rates at the hotel rose 15 percent to $184 per night. At Paris Las Vegas, occupancy fell 3 points to 91 percent but rates rose 10 percent to $160. At Bally's Las Vegas, occupancy fell 1 percentage point to 93 percent but rates rose 8 percent to $123. The Flamingo reported a 6 percent drop in occupancy to 87 percent but rates rose 17 percent to $108.